With plans being laid for industrial action over the proposed loss of final salary schemes and the imposition of later retirement, union leaders piled in to criticise the work of Labour's former work and pensions secretary.

Business leaders, however, said Hutton had taken a big step forward in making pensions "sustainable and affordable".

NHS employers which, with their staff, pay into the largest centrally run occupational pension scheme in Europe, were conciliatory about "the sensitive issue" of changes but warned threats of industrial action would damage patient care.

Unions argued that the coalition government was "coming for public sector pensions" and had already pre-empted Hutton by demanding over 50% increases in workers' contributions just as they face pay freezes and "massive" rises in the cost of living.

The unions warned that ministers would simply "cherry-pick" the report and claimed that pension rises would soon be lower anyway because they would become dependent on the consumer price index rather than the generally higher retail price index.

The Royal College of Nursing general secretary, Peter Carter, said: "There's no doubt that these proposed changes are another hammer blow to the morale of dedicated nurses. We know the strength of feeling among members and will vigorously defend fair pensions for nurses and healthcare assistants at all times."

Public sector pensions were not "gold-plated" and they were affordable, said Christine Blower, general secretary of the National Union of Teachers. "These measures will price many teachers and public sector workers out of pension schemes and lead to dependency on the state in old age … The real pension problem is in the private sector where two-thirds of employees are not in any employer-backed scheme. We need decent pensions for all."

The GMB union joined the outcry. Brian Strutton, its national secretary for public services, said Hutton had failed to fully take into account recent government policy changes on contributions and index linking. "As a result many of his conclusions are questionable and will infuriate public sector workers."

Dean Royles, director of the organisation NHS Employers, said: "Employers have told us that they are conscious of the financial pressure that many staff are currently under and are mindful of the need to engage with them so as to avoid any impact on patient care ...

"The NHS pension scheme underwent major change in 2008 and this was achieved successfully through partnership with the health trade unions. However all public sector pension provision must evolve and undergo further change and we are hopeful that the outcome is a modern pension that is fair to all."

The NHS scheme has 1.3 million people paying into it, more than 400,000 deferred members and more than 600,000 people receiving an NHS pension. The average annual pension for retired NHS staff is around £7,000. The average for former women workers is around £5,000 with more than 50% receiving a pension of less than £3,500. Male NHS pensioners get an average of about £13,500 while more than half receive a pension of less than £6,500.

Baroness Margaret Eaton, chair of the LGA, said: "We support a system where pension payments are linked to career average earnings. It addresses the inherent inequalities of the current final salary arrangements which favour those who progress through the salary scales and, in particular, those who get a promotion just before retirement."

The LGA said the average pension paid under the local government pension scheme was £4,235 a year.

John Cridland, director general of the CBI, called the Hutton report "a well-balanced package of measures designed to reduce costs while retaining good pensions" and hoped that consensus could form around it.

"What's vital now is that Lord Hutton's recommendations are implemented in full by government and public sector employers. A piecemeal approach simply won't deliver the right balance of affordability and quality."

The Institute of Directors welcomed "a step in the right direction." Director general Miles Templeman said: "It is time for the public sector to face up to the sort of changes we have seen affecting private sector pension schemes, particularly in relation to renegotiation of existing obligations. Renegotiation has happened in the private sector and there is no reason why it shouldn't happen in the public sector.

"Against the backdrop of an ageing population and the current crisis in public finances, taxpayers can't be expected to fund public sector pension schemes that are typically worth 40% of salary."

The National Association of Pension Funds, which has 4 million public sector pension holders among its membership, said the report had struck the right balance between fairness and cost. Its chief executive, Joanne Segars, said: "Moving to a new career average scheme is a sensible approach that will help protect the lower paid. This could be a better deal than the current final salary arrangements for the lower paid and those whose earnings spike mid-career.

"An increase in retirement age helps manage costs and is unavoidable given that people are living longer. Improved scrutiny and the proposed cost ceiling will help ensure taxpayers aren't signing a blank cheque."

Steve Beet of the consultancy firm PwC, who led a research team commissioned by Lord Hutton, said that "really significant changes" to public service pensions were inevitable and schemes must start preparing now.

"Even if they do, the timetable is extremely tight. Without real drive from the top and dedicated effort immediately, we are not confident that these critical changes will be delivered on time, with schemes ready for members to build up rights under the new arrangements by 2015.

"We anticipate that many new schemes will need to be set up to accommodate the package of reforms, and that both old and new schemes will then need to be run in parallel for decades to come."

Hymans Robertson, a pensions and benefits consultancy, said: "The reforms will not necessarily reduce the level of income in retirement for the majority of members."

John Wright, the consultancy's head of public sector, said: "There are three things that affect the value of pensions to members: when they get their pension, the amount of their pension and how much they have to pay in.

"Lord Hutton has addressed the first of these [when you get your pension]. The other details will be decided by the government.

"The government has already announced increases in contribution rates and will decide how much the country can afford to spend [the cost ceiling proposed by Hutton] before the other details can be worked out."

About this article

Trade unions: pension reforms are unfair and misguided

This article was published on
the Guardian website
at 07.56 EST on Thursday 10 March 2011.
It was last modified at 03.40 EDT on Tuesday 20 May 2014.
It was first published at 05.59 EST on Thursday 10 March 2011.